Thursday, December 17, 2009

Musings on Gold...GOLD! Buy GOLD! The World is Going to End Anyway

It seems like gold has been appearing everywhere of late, especially in those late-night commercials that ask you to pick up any loose gold that happens to be lying around the house, put it in an envelope, and send to those very nice sounding people who will send you a check for your trouble. The guy is strumming a banjo; how evil could he be? And I am absolutely sure they pay top dollar to the people desperate enough to fall for the scam.

On the other hand, the FOX Channel's Glenn Beck, fear-monger par excellence, has been shilling for a gold-selling company, while at the same time using his show to advise people to buy gold in these terrifying times. He tells us to "pray over it" ("Dear God and Jesus, should I use my money to give food to the poor, or buy gold???"; I wonder what voice speaks in his head, and what it says to him?). I'm sure there is no conflict of interest here...

I started thinking about gold because one of my very first efforts at web page design (1997, I think) still sits in a largely original state on my school website, a discussion about the history of the gold mining in the Mother Lode. It talks about the value of gold at the time, and the then current state of mining. A recent visitor to the site commented the price of gold had quadrupled since I wrote the piece, and suggested that interest in mining was up again (if you check out the site, be aware that some of my numbers are speculative).

First off, does anyone know of any ongoing interest in reopening any Mother Lode mines? I'd like to know about it. I must say, that if I were already operating a mine, I couldn't be happier. Great prices! But opening, or reopening a mine? Do mining companies trust that the price of gold is going to remain stable or continue to rise? Enough to make the incredible investments in equipment and regulatory paperwork? I've gotta say that the run-up in the price is very reminiscent of the dot.com craziness of the 1990's, the stock market craziness of the 2,000's, and the real estate insanity of the last 10 years. Wow...how'd they all do? What I remember the most was the maniacal exhortations to invest, invest, invest, even as prices started to fall.

If you are thinking of falling for one of these gold investment schemes, take a look at this article by Nouriel Roubini. For the record, he was one of those gloom and doom economists who predicted the ongoing recession-depression (does anyone believe it's over?) before it was fashionable. Can you spell "g-o-l-d b-u-b-b-l-e"? It may a good time to sell gold, but I wouldn't trust a banjo-strumming confidence man. See a reputable jeweler first. As for Glenn Beck and the other investment shills? Well, consider the source...

Late Add: Seems (surprise, surprise!) that some of those commercial gold buyers have gotten in trouble. Check out this report.

4 comments:

A couple of year ago I visited the Ruby Hill Gold Mine in Eureka, NV. It's operated by Barrick Mining, and on the tour they said they probably wouldn't have been mining if gold prices hadn't risen. I think they had closed the mine in the late 90's and reopened it in early 2000's (the tour was in 2003).

Of course it is not a Mother Lode mine and didn't require as much investment to start up again. But there are other cases, certainly.

There's another factor that's delaying the re-opening of old gold mines. In the 1990s, a Canadian company named Royal Oak made a lot of money doing so; several years ago, it went bankrupt. Needless to say, its role-model status evaporated along with its share price. That bankruptcy put a cloud over other companies doing so, particularly in the banks' eyes.

There are plenty of places where the average citizen can still go to pan for gold in the Sierra though, real close to where we live. Head up, grab a few buckets a week, wash it at home when you get time. Make a few grand on the side. I'm unemployed soon. Sounds like a plan to me!

Very few new open-pit mines will be opened in California because all pits now have to be completely backfilled, which essentially doubles the stripping ratio, though usually not completly doubling the cost of stripping (there is no blasting required to move the already moved rock). Underground mines would be a different story.

The price of gold doesn't seem that high to me - maybe a little high - but I haven't read up on current thinking about it. Some of the current fluctuation has to do with the strength of the dollar.

They usually do more advertising to sell gold on TV after the price has gone up, rather than when the price is low. The price dropped a lot in 1997. Wonder why I didn't buy any then? :)

About Me

I am a teacher of geology at Modesto Junior College and former president of the National Association of Geoscience Teachers, Far Western Section. I have led field trips all over the western United States, and a few excursions overseas, but my homebase is the Sierra Nevada, the Great Valley, and the Coast Ranges of California.